Why Bond & Treasury ETFs Are Regaining Popularity in 2025 (TLT, IEF, BND, LQD)

📈 Why Bond & Treasury ETFs Are Regaining Popularity in 2025 (TLT, IEF, BND, LQD)

Income today, capital gains tomorrow? Here's why bond ETFs are making a comeback.

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📚 Table of Contents

• The Fed’s Stance and Rate Cut Expectations
• Why Bond ETFs Shine in a Falling Rate Environment
• TLT Price Sensitivity and Duration Risk
• Popular Bond ETFs to Consider
• How to Think About a Bond ETF Strategy
• Conclusion

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📉 The Fed’s Stance and Rate Cut Expectations

The Federal Reserve has maintained elevated interest rates to combat inflation. However, recent economic indicators— such as slowing job growth and easing inflation—have increased expectations for policy easing. The Fed’s messaging has grown less hawkish, and officials have hinted that gradual rate cuts could be on the table if inflation remains subdued.

💸 Why Bond ETFs Shine in a Falling Rate Environment

Bond ETFs offer a two-pronged appeal:

• Interest Income: Regular payouts from the coupons of underlying bonds.
• Capital Gains: Bond prices typically rise when interest rates fall, leading to potential price appreciation—especially for long-term bonds.

In essence, investors can lock in attractive yields now and benefit from capital gains later if rates decline.

📊 TLT Price Sensitivity and Duration Risk

Below is the recent price history of TLT, a long-duration Treasury bond ETF:

TLT’s daily price movements reflect market expectations for interest rates.